The latter is used to buy back shares rather than pay dividends: over the past decade, Sprouts has shrunk the number of its shares in issue by nearly a third, boosting earnings per share in the process. The company’s stores are more profitable than those of AAA-rated mainstream American supermarket rivals Walmart ( US:WMT) and Kroger ( US:KR), and deliver strong surplus cashflow. When combined with new and maturing stores, this should take revenue growth into the 7-8% range. Sprouts Farmers Market is being conservative with its growth target for its existing stores of just 3% a year. The launch of a loyalty card is expected some time in 2024 and the customer data that comes with it should provide a big boost to the company’s marketing efforts. Internet sales are rising thanks to an effective partnership with delivery services DoorDash and Instacart, while higher-margin, own-label sales are growing and now account for more than 20% of the total. This will be backed by investment in new distribution centres closer to its shops, which should ensure that products stay fresh and are cheaper to transport. Join the elite! Get the weekly Citywire Elite Companies newsletterĪs part of this expansion, it is shifting to smaller stores of around 21,000 sq ft, which tend to be more profitable and make it easier for customers to shop. More than half of its shops are located in California, Texas and Arizona, and the company is now heading east to Florida, Georgia and the mid-Atlantic states. The plan is to increase its store numbers of just over 400 currently at a rate of 10% per year for the next few years. The performance of the shares suggests that the business model is working: since a pandemic low in 2020 – after which Sprouts Farmers Market delivered a step-change in profits – the stock has returned 215%.Īnd its potential to become a more efficient retailer could unlock further gains. The company believes that its close relationships with smaller producers give it a competitive edge by allowing it to buy high-quality products at lower prices than conventional supermarkets – and a lot lower than high-end specialist retailers. It has positioned itself as a place for health-conscious customers to buy natural and wholesome foods at affordable prices a combination of keen pricing and discounts, along with a growing brand range, is its way of wooing shoppers. Sprouts Farmers Market has been in business since 2002 and has steadily grown its revenues and profits in an established US natural food market. Sources: Citywire / Morningstar, latest holdings data. Sprouts Farmers Market’s top Elite Investors Elite Investor Not only that, but the supermarket chain ranks among the top 10 most popular American companies for these investors, ahead of much bigger and better-known businesses. Sprouts Farmers Market has received a top AAA rating from Citywire Elite Companies. Twenty-one of these investors – each among the top-performing 3% of the 10,000 equity fund managers tracked by Citywire Elite Companies – have bought the shares of Sprouts Farmers Market ( US:SFM), a small (by American standards) supermarket chain with a market value of $4.2bn. However, some of the world’s best fund managers believe they have found a company that can deliver the appeal of natural foods at a more palatable price for cost-conscious times. Despite Amazon’s promise to cut prices, Whole Foods has struggled to shake its ‘Whole Paycheck’ nickname in America. Shoppers are increasingly told that natural foods are good for them and good for the planet, but are they good for the investors in the companies that sell them?Īmazon’s ( US:AMZN) $13.7bn (£11bn) swoop on high-end American supermarket chain Whole Foods in 2017 added to the investor buzz around premium retailers of locally and ethically sourced foods.īut amid high inflation and the rising cost of living, investors are now questioning whether they can continue to attract growing numbers of customers willing to pay their higher prices. Serve customers quickly to keep them happy and earn more coins Then invest your profits in new equipment and hire additional workers so that you can grow your business.This article first appeared in The Telegraph’s Questor column. The long-awaited sequel to Supermarket Management has just hit the shelves!ĭo you have what it takes to run a busy supermarket? Now you have a chance to show everyone! Become the manager of a small roadside shop and end up as the owner of a competitive grocery chain in this addictive time management game. Have you played the prequel to this fascinating game? Don’t miss Supermarket Management - on iPad and iPhone! Current version: 1.1, last update: 7 years ago
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